Size Matters: Where to Look for Hidden Value Plays

There’s a secret to finding small pockets of hidden value in this raging bull market.

I’ll reveal it in just a minute through a late-night conversation I had with my colleague Jonas Elmerraji…

On Jonas’ hunt for value plays, he sticks to small-caps — which come with big advantages because of their size.

Jonas and I are arrived in Toronto yesterday afternoon. We’re here to meet with a group of American and Canadian technicians to try to get a clearer read on the markets.

We’ll spend the day sifting through countless charts and chatting with some of the best minds in the business. I’ll have a chance to share my favorite insights with you soon enough…

However, since we arrived in Canada last night, Jonas and I haven’t been talking about the charts. Instead, our conversation turned to value.

After all, that’s one of the biggest gripes about this market. Value-seeking investors aren’t seeing many bargains out there. Jonas’ response?

Maybe they aren’t looking in the right places…

“There are three core factors that’ll hold the keys to the biggest gains this year: keeping a deep value focus, sticking with small stocks and buying exciting businesses,” Jonas explains. “Value matters. I’ll spend $6 to buy $10 worth of assets all day long if I’m given the chance. And right now, there are still plenty of chances to do that.”

On Jonas’ hunt for value plays, he sticks to small-caps — which come with big advantages because of their size. Few analysts cover the smaller stocks on the market, and few mutual funds are even allowed to invest in them. That lack of professional awareness of small caps means that you’re far more likely to run across a major mispricing or hidden opportunity in a small cap than you are in a larger name.

Jonas isn’t just blowing smoke, either. His open gains are at an incredible 90% over the past year. And he continues to shred the broad market….

“I’ll be focusing on deep value small stocks and exciting (easily explained) businesses to keep our market-crushing performance on track for the second half of the year,” he says…

P.S. Jonas just told me that if you can beat him at his own game, he’ll pay you double. In this morning’s Rude Awakening email, I told readers how to cash in on that challenge. If you’re not a Rude subscriber, not to worry… You can sign up for FREE, right here. That opportunity will come around again, among the many others that you’ll receive each morning.

About Greg Guenthner:

Greg Guenthner, CMT, is the managing editor of The Rude Awakening and editor of Agora Financial’s Microcap Millionaires. Over the past decade, Greg has helped build Agora Financial’s small-cap and technical research teams. His analysis has appeared in Forbes, Yahoo Finance, Bankrate and countless other websites and publications. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.